FT: Sachs on Camdessus' successor (fwd)

[Robert Weissman <rob@essential.org>]

Financial Times, 11/15/99

by Jeffrey Sachs - Time to end backroom poker game
 
 The IMF's new managing director must be chosen by an
 open and democratic process, says Jeffrey Sachs

                                   Michel Camdessus has wisely
                                   recognised that the International
                                   Monetary Fund needs a renewal of
                                   vision and leadership.

                                   The cognoscenti of the world
                                   financial system expect his
                                   successor as managing director to
                                   emerge from the backroom poker
                  game of European politics, as has always happened in the
                  past. Will it be a German this time instead of Frenchmen,
                  they wonder breathlessly.

                  In the meantime, the developing world - 85 per cent of the
                  world's population and nearly 100 per cent of the receiving
                  end of IMF policies - is expected to stand by and wait
for the
                  result. This is no way for a global institution that preaches
                  transparency, good governance and democracy to function.

                  The position of IMF managing director is one of the most
                  important in the world. The IMF, wrongly I would assert, now
                  has programmes in more than 50 countries, and is
                  negotiating with at least a dozen more. Hundreds of millions
                  of people depend on the quality of IMF leadership. In truth,
                  they often depend more on IMF leadership than on their own
                  political leaders, so intrusive has the IMF become in the
                  weak and vulnerable nations of the world.

                  Yet the IMF's legitimacy is dangerously low. It is
already the
                  object of riots and unrest throughout the developing world,
                  as well as scorn in the US Congress and even in much of
                  the financial world. There is little chance of regaining
global
                  legitimacy if the developing countries have no role in the
                  selection of a new managing director, including the real
                  possibility of a successful candidate from a developing
                  country.

                  At a time when the gulf between the world's richest and
                  poorest is the widest in history, one might expect some
                  more serious attention to ways to improve the prospects of
                  the poorest countries - including the appropriate roles of
                  international institutions. And yet, with the
horse-trading to
                  fill the IMF vacancy already in train, not a word is heard in
                  Washington or the European capitals about the developing
                  world's role in this process. Since the US believes it owns
                  the presidency of the World Bank (a rational belief
indeed, in
                  view of past practices), the Europeans believe they own the
                  position of IMF managing director.

                  According to the IMF's articles of agreement, the managing
                  director is to be chosen by the executive board of the IMF.
                  The board is, of course, not a fully democratic
institution, for
                  two reasons. First, it is by design much closer to the
rule of
                  one-dollar, one-vote than one-person, one-vote. Voting power
                  within the fund is allocated according to IMF country quotas,
                  which in turn are allocated roughly according to economic
                  size. India, with 16 per cent of the world's population, has
                  just 2 per cent of the votes within the IMF.

                  The second problem, more discouraging and less tractable,
                  is that many countries within the fund are themselves so
                  undemocratic that their votes can hardly be considered
                  representative of the aspirations of their own people.

                  Despite these serious shortcomings, an open campaign for
                  the position of managing director, followed by an open vote
                  of the executive board, is still vastly to be preferred to a
                  backroom deal in Europe. An open process would force
                  candidates to state their visions of the role of the
fund; and,
                  even more importantly, would force the executive board and
                  the world community at large to focus on what the fund has
                  been doing and what it should be doing.

                  The developing and post-communist economies have about
                  40 per cent of the IMF votes, enough to force the candidates
                  to confront issues of interest to the poorer countries.

                  There are at least three distinct visions of the IMF. The US
                  government sees it as proconsul to the developing world, the
                  institution that dictates the terms so that laggard societies
                  are prepared for the global economy of the 21st century.

                  The UK position, set out by Gordon Brown, the chancellor,
                  has been to see the IMF as the repository of globally agreed
                  standards in monetary, fiscal and financial policies.
This is a
                  much more collegial vision, though it raises crucial
                  questions as to the appropriate borderline between global
                  harmonisation and the freedom of countries to choose their
                  own institutional forms.

                  A third position, espoused by a remarkably wide range of
                  ideologies, and a view that I share, is that the IMF should
                  stop being a nanny to the world and should focus on
                  monitoring the world's monetary system, including
                  exchange-rate arrangements and international capital
                  markets. Advocates of this position see comprehensive debt
                  cancellation as an effective way to end the need for
                  perennial IMF programmes in the poorest countries.

                  The cause of good governance would therefore be served by
                  a process of the following sort. The IMF executive board
                  could invite candidacies from all parts of the world
during the
                  next 60 days. The board could also select an outside body
                  of experts to review the candidates, in order to advise on
                  professional and ethical qualifications, a standard procedure
                  for important nominations to the US judiciary and other key
                  positions in many parts of the world.

                  The outside experts would designate candidates as qualified
                  or unqualified only in terms of professional knowledge and
                  international leadership experience, but would not rank the
                  nominees.

                  Early next year, the candidates would make public their
                  broad positions on the IMF's role and their views on issues
                  such as debt relief, exchange-rate arrangements, global
                  governance and management of capital flows. One would
                  expect them to meet groups of international civil society
                  during the period as well. Such groups would also submit
                  their opinions to the executive board.

                  By February or March, the executive board could take a
                  public vote on the candidates, with board members
                  explaining the reasons for the vote. The people of the world,
                  not just finance ministers, should hear the basis of this
                  decision.

                  The world is filled with promising candidates. Western
                  Europe boasts some outstanding figures, but so do other
                  parts of the world.

                  How about Leszek Balcerowicz, Poland's finance minister,
                  the most successful economic reform leader in the
                  post-communist world? Or Manmohan Singh, India's former
                  finance minister, who brought macroeconomic stability,
                  market reforms and renewed economic growth to India's 1bn
                  people?

                  For a crucial global institution, it is time to tap our best
                  global talents, and to do so openly and democratically.



                  The author is director of the centre for international
                  development at Harvard University